Asia ETF Roundup (Market) – September 2021

Major Markets Performance

News related to the U.S. debt ceiling and China’s Evergrande (03333, listed in Hong Kong) debt crisis pushed markets lower in September. The Morningstar Global Markets, Developed Markets, US Market and Europe indexes slipped anywhere from 4-5% during the month. Emerging equity markets also slumped in September. Equity markets in Pakistan, Thailand and Brazil fell between 6-12%. Chinese stocks’ losses were largely in-line with the global markets, at 4.7% (proxied by their respective Morningstar indexes in U.S.-dollar terms).

The U.S. dollar appreciated 1.7% (as measured by the ICE Spot Index) in September. The Euro dropped 1.8% against U.S. dollar. Major Asian currencies also depreciated against the greenback. The Indian Rupee, Yen, Won, and Peso depreciated around 2%. The Chinese Yuan was little changed against the U.S. dollar (appreciating by 0.02%), and maintained its year-to-date gain of 1.2%.

Precious metals prices continued to trend lower in September. The prices of platinum and gold dropped around 4% while Sliver prices plunged 10.5% during the month.

Economic and Market News

Rate Hikes in Russia and Brazil

• Russia Hikes Rates by 25bps – Bank of Russia raised its key interest rate by 25 basis points to 6.75% on 10 September. This is the fifth rate hike this year. The bank has collectively added 250bps to its key interest rate for the year-to-date. The Bank stated that “The Bank of Russia holds open the prospect of further key rate rises at its upcoming meetings.”
• Brazil Hikes Rates by 100bps – Central Bank of Brazil raised its key interest rate by 100bps to 6.25% on 22 September. Brazil’s central bank has raised rates five times this year, collectively adding 425bps to its key interest rate. The Bank stated that “For the next meeting, the Committee foresees another adjustment of the same magnitude.”

Official launch of Cross-boundary Wealth Management Connect in Greater Bay Area

On 10 September, Cross-boundary Wealth Management Connect in Greater Bay Area was launched to enable residents in Hong Kong, Macao and nine cities in Guangdong Province to carry out cross-boundary investment in wealth management products distributed by banks in the area. There will be an aggregate quota of RMB 150 billion and an individual investor quota of RMB 1 million for both Southbound Scheme and Northbound Scheme. The scheme will cover low to medium risk investment products which are relatively simple. The announcement can be found here.

PBOC and HKMA launched Southbound Bond Connect Channel

On 15 September, People's Bank of China and the Hong Kong Monetary Authority announced that the Southbound Bond Connect would be launched on 24 September. The Connect will enable Mainland institutional investors to invest in the Hong Kong bond market. Recall that the Northbound Bond Connect was launched in July 2017. The annual quota and daily quota of the Southbound Bond Connect channel are RMB 500 billion yuan and RMB 20 billion respectively. The joint announcement of Southbound Scheme can be found here.

Macau Holds Public Consultation for Proposed Revisions of Gambling Law

On 14 September, Macau government proposed revisions to the law of Legal Framework for the Operations of Casino Games of Fortune. The proposed revisions covered nine key discussion points including the introduction of Government representatives at the concessionaires and the number of concessions of casino games of fortune. Macau Government is holding a 45-day public consultation to the proposed version of Law since 15 September. The announcement can be found here. 

China Bans Crypto Currency Related Activities  

• On 24 September, People's Bank of China announced that crypto currency-related transactions such as trading, crypto exchange, token issuance and derivatives on crypto currencies will be considered illegal financial activities. Offshore crypto exchanges have also been banned from serving customers in mainland China. The announcement can be found here (Chinese only).
• On 24 September, ten government agencies in China announced efforts to eliminate cryptocurrency mining activities. The announcement banned new crypto mining projects and urged local governments to set up exit plan for current crypto mining projects. The announcement can be found here (Chinese only).

Inflation at 0.8%; Caixin/Markit PMI Rose to 50.0; Official PMI Experienced First Contraction in the Year

• CPI dropped to 0.8% in August from 1.0% in July. Food prices were the key contributor, dropping 4.1% YoY. In particular, pork prices fell 44.9% YoY.
• In September, the Caixin/Markit PMI rose to 50.0, from August’s reading of 49.2. The official PMI fell to 49.6 from August’s reading of 50.1, marking the first contraction since February 2020.

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